1.The Point is to Invest and Grow

When the chips are way down, things can only look up. Amidst pandemic-constrained economic activity, in its first advance estimate of national income for 2020-21, the Central Statistics Office (CSO) has pegged GDP growth contraction at 7.7%. Clearly, the way forward is a bold policy-push to proactively shore up the growth momentum.

The way ahead is to fast-forward large infrastructure projects, complete with a robust project governance structure, via a national-level project management agency to aid collaboration between Centre and the states, and for gainful public-private partnerships. Foreign capital can be drawn into infrastructure. Notice that at current prices, gross fixed capital formation (GFCF), or the investment rate, is down to 24.2% of GDP, which is over 10 percentage points lower than that in the high-growth years of 2003-08.

Also, while growth in agriculture is put at a credible 7.3%, at current prices, it does point to supply-constrained price rise. Further, the steep contraction in manufactures, construction and trade, transport, hospitality and allied segments surely calls for sustained fiscal support to purposefully broadbase recovery going forward. We do need to duly step up government expenditure and shore up public investment to boost demand. Targeted fiscal incentives are warranted to kick-start growth. With a well-planned vaccination drive, we can surely better manage the risks at hand.

Along with a massive investment programme, we need to objectively improve procurement processes for bigticket investments in the pipeline, and strengthen contracts management in the bargain. Further, we need to streamline mediation and conciliation systems for large projects, for instance, by designating special courts for prompt resolution of infrastructure disputes. Note that under the Specific Relief (Amendment) Act, 2018, there is a provision for mandating civil courts to settle project disputes, and all states do need to be involved for speedy resolution. Focused policy action would better coagulate funds on the ground. The built future is now.

2.Think Out-of-the-Box On Telecom Spectrum

After four years, the government is venturing into spectrum auctions once again, offering around 2,250 MHz of spectrum across seven bands. It has refused to learn from the previous auction in 2016, when high reserve prices curtailed offtake.

The reserve price is very high, telco finances are a mess and, but for the dire necessity of renewing their lease on spectrum as it expires later this year, they would not bid at all. Perhaps it is time the government thought up some out-of-the-box alternatives to flogging spectrum to emaciated telcos.

Suppose at least two special purpose vehicles come up to buy up the spectrum on offer. Three would be better. This will give the government some money upfront. Suppose these vehicles act as suppliers of spectrum on a spectrum exchange, to offer week-ahead, dayahead or even hour-ahead contracts, and telcos are able to buy the spectrum they need as and when they need it.

In the ongoing auctions of 5G spectrum in the US, cable companies and DTH operators too are competing with telcos to bid up prices. Such would-be users of spectrum could be allowed to place their demand on the spectrum exchange, and the competition would bid up prices. Would this mean that telco tariffs would turn dynamic, with calls or data traffic during peak hours costing more than at other times? Probably. Why not?

Telcos would not need to spend money on hoarding spectrum and would have to buy only what they need. This would lower costs. Who would set up the spectrum-owning entities? There are multiple options. Private equity firms could. A finance firm can be induced to set up a spectrum investment trust, on the lines of a real estate investment trust. An intermediary holder of spectrum is an idea whose time has come.

3. A capitol lesson: Time for social media to be responsible for content

The carnage at the US Capitol building has retriggered debate on the role of social media in providing a platform to disseminate false information that finally culminates in violence. A fallout of the widespread outrage about the event was that President Donald Trump was locked out of his social media accounts for instigation. Twitter and YouTube have served serious warnings about permanent removal while Facebook and Instagram have frozen his accounts. The space for free expression in democracies is influenced by local context. But where everyone draws a line is when it descends into instigation of violence.

Social media companies have taken some steps to curb the dissemination of fake news. These are very inadequate and nobody can miss that serious action against Trump is coming only at the end of his term. Algorithms continue to push lies and hatred. But with American democracy coming under grave threat this week, there is a much stronger case now for ushering in a sophisticated regulatory mechanism to oversee dissemination of information on social media, without restricting the benefits these platforms provide.  Social media should not continue to roam free of accountability and the compliances that are rightly mandatory for traditional media like newspapers.

These are issues that must be debated in Parliament, which is in the process of crafting a personal data protection bill.  Of course in India the default approach to maintaining public order in the age of social media is to shut down the internet. This imposes huge social and economic costs – $2.8 billion in 2020 according to a UK research firm. Moreover, an internet shutdown is antithetical to the government’s Digital India policy. We therefore need a more sophisticated approach to regulating social media companies and checking their spread of fake news.

4. Bride price: Casteist policy is cloaked as a favour to women

The Karnataka government claims it wants to help impoverished Brahmin women. One would think that it wants to address their actual disadvantages – their marginalisation on account of poverty and gender. Instead, it cares about their one axis of advantage – their being and staying Brahmin. The state has unveiled two financial aid schemes – one for Brahmin women to marry and another for them to marry priests specifically. The caste system rests on controlling marriage, whereby caste purity is maintained. The state is now offering money to keep Brahmin women within the caste fold.

If it genuinely cared about them for their own sakes, it could have offered scholarships or employment training or even unconditional transfers, rather than bride price. This scheme is neither just economic redistribution nor social redress. Of course Brahmins can be poor, just as those from other castes – but their caste is not the reason for their poverty. If anything, their inherited social prestige might even make up for economic hardship.

Their situation cannot be compared to that of  subordinated castes, who had historically been condemned to menial work, and are still deprived of opportunities and networks, or of minorities who are discriminated against in the job and housing markets, for instance. While the UP government passes a law to prevent women from marrying outside their religion, the Karnataka government offers an incentive to keep women within their caste. They are both operationalising the Manusmriti, rather than upholding the promise of the Indian Constitution.

5. The economy is looking up | HT Editorial

The National Statistical Office (NSO) expects India’s Gross Domestic Product (GDP) to contract by 7.7% in 2020-21, according to the first advanced estimates for GDP released on January 7. The projection is in line with various institutional and private forecasts, and paints a relatively better economic picture than the widespread consensus on a double-digit contraction up to a few months ago. While the recent recovery in economic performance — other high-frequency indicators confirm the trend — is a welcome development, it should not generate complacency on the policy front. Here is why.

Even though a 7.7% contraction sounds better than what was being predicted earlier, 2020-21 will be the worst year for growth in India. An economic shock of this magnitude is likely to leave significant and deep scars on businesses, in both the real and financial sectors, and on households. That the Indian economy was caught in a protracted slowdown even before the pandemic will make coping with the current crisis even more difficult. A large part of the Indian economy is in what is referred to as the informal sector. It is entirely possible that the economic indicators which have come in so far — the GDP projections are based on extrapolations from limited statistics — have failed to capture the extent of pain in the informal sector. Anecdotal evidence and corporate earnings for the first two quarters have highlighted how smaller entities have suffered disproportionately.

A substantial part of the ongoing economic recovery can be attributed to the fact that India has not faced a second wave of Covid-19 infections like the West. As the government gets ready to roll out its vaccination programme, the public health crisis will, hopefully, subside. However, it is also a fact that India’s fiscal stimulus was among the smallest for major economies in the world. Restoring growth going forward is going to be difficult without a big push from government spending. The Narendra Modi government has, to its credit, also unleashed important second-generation reforms in critical sectors such as labour and agriculture during the pandemic. These should generate tailwinds for future growth. But long-term expectations from these reforms can be compromised if the economy hits a demand-side constraint in the short-run. This should be the guiding principle of economic policy, especially in the next budget.